Dec 2017

Housing

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 Downturn witnessed for seventh year in a row
Area sold (mn sq ft) Area Launched (mn sq ft)

70.0
40.0
60.0 57.9
34.0
35.0
30.1 49.8
29.2 50.0 45.4
30.0
41.5
23.9 22.8 40.0 37.7
25.0

20.0 18.2
15.9 30.0 24.5
24.3

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14.1 20.6
15.0 18.9
9.9 20.0
10.0
10.0
5.0
0.0
0.0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 9M 9M 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 9M 9M
2016-17 2017-18 2016-17 2017-18

Source: Annual reports/ presentations of seven developers: DLF Ltd, Godrej Properties, Mahindra Lifespace Developers, Prestige Estates Projects, Purvankara Projects, Sobha
Developers and Unitech Ltd

 Developers rationalizing new supply- focus comes back to mid income ticket size

 Instances of postponement of new launches

 Few cases of booking cancellation witnessed in 2017-18

 Sluggish growth in revenues due to subdued demand
Aggregate revenue performance

40%  Revenue of listed companies plummeted by 9% vis-

33%
30% à-vis 8% growth in 2015-16 mainly on account of
20% 13%
10%
8% the crash in the already sluggish housing market in
10%
1%
0% -4% -4%
-9%
the second half of fiscal 2017

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-10%
-20%  Demand to witness a marginal uptick in 2017-18 on
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Note: Aggregate financials for 32 real estate developers account of moderate recovery due to effective
Source: CRISIL Research

Region-wise CAGR of Revenues (2009-13 and 2013-2017)

implementation of RERA and most developers
launching projects in affordable housing category
30%
24%
25%
 Capital values in 2016-17 declined by 2-4% and are
20%

15% 12% expected to appreciate marginally in 2017-18.

10% 7%
5%
5%  South-based real estate developers dominated the
0%

-5%
-0.2% -0.5% North and West based players with a growth of 24%
South West North
2009-2013-CAGR 2013-2017-CAGR CAGR over 5 year period
Note: 9 players for South, 10 players each for West and 12 players for North have
been considered
Source: CRISIL Research
 Capital values continue to sink
Inflation and capital values Average capital value growth across 10 cities*

25.0%
36.3%
20.0%
15.0% 26.0%

10.0%
5.0% 12.4%

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8.4% 6.0%
0.0% 5.7%
4.6%
-5.0% -0.6%
-1.6% -0.9%
-10.0% -4.9%
-13.1%
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17E 2017-18P
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18P
Average realisations across 10 major cities (Rs psf)
Nominal GDP growth* CPI Inflation Change in property prices across 10 major cities**
Note:* The major 10 cities tracked by CRISIL Research are: Ahmedabad, Bengaluru,
Note: Property prices are for calendar year and other indicators are for financial year Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-Mumbai Metropolitan Region,
Source: CRISIL Research NCR and Pune
Source: CRISIL Research

 Pressure continued to exert on realizations, average capital values dipped during 2016-17.

 Property prices expected to be under pressure in 2017-18

 Margins improved marginally in 2016-17
Aggregate profit margins (in per cent)
(in per cent)
60
55

50
47

40 41 41
41 35
37 39 36
35

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30

22 20
20
16
12
10 10 8
5 8

0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Operating profit margin Net profit margin

Note: Aggregate list of 32 real estate developers

Source: CRISIL Research

 Operating margins improved marginally in 2016-17. Operating margins are expected to under pressure in 2017-18 as
developers would face cost concerns

 Net margins also improved marginally in 2016-17 on account of reduced interest charges. Net margins are expected to
remain range bound in 2017-18
 Rising debt; profitability under pressure for developers
Debt-equity ratio

1200 1.0 1.2

1.0
1000 0.9
0.9 0.9
0.8 0.8
800 0.7

0.7 0.7
Aggregate debt for key listed players stood at Rs 961 billion in March
600 0.6
2017.

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400  Debt equity ratio maintained at 1.0 in 2016-17 as well
0.3
200
501 576 615 640 674 704 826 873 961
0 0.0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Total borrowings (Rs billion) - LHS Debt to equity - RHS

Interest coverage and ROCE

14.0 12.9

 Interest coverage ratio continue to fall from 3.3 times in 2008-09 to 1.3 in
12.0

10.0 8.3
7.7 8.0
7.5 7.4 7.4 7.4 7.5 2016-17.
8.0

6.0
 ROCE during the same time fell from 12.9 to 7.5
3.3
4.0 2.7 2.7
1.9 1.6 1.5 1.7 1.4 1.3
2.0

0.0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Interest coverage ROCE

Note: Aggregate for 32 real estate developers

Source: CRISIL Research
 Rise in growth of inventories resulted on a strained OCF for
the industry

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Note: Aggregate set of 32 real estate developers
Source: CRISIL Research
 Key asset sales in 2016-17
Year Owner Investor Land area (in Location City Amount (in Rs
acres) mn)
Oct-17 Nirmal Lifestyles Piramal Realty 3.2 Mulund MMR 1,530

Oct-17 N.A SHG Realty LLP N.A Thaltej Ahmedabad 1,700

True Value Infra Build
Oct-17 N.A N.A Thaltej Ahmedabad 1,430
LLP

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New Delhi - Dwarka
Sep-17 BPTP Shapoorji Pallonji 20 NCR 1,500
Expressway

Sep-17 N.A K Raheja Corp-GIC 3 Worli MMR 6,100

GlaxoSmithKline
Sep-17 Oberoi Realty 60 Thane MMR 5,550
Pharmaceuticals
Lulu Group/
Sep-17 Dewa Projects 16.6 Marine Drive Kochi 3,080
Puravankara
Sep-17 ABIL Group Rohan Builders 8 Hinjewadi Pune 550

Sep-17 N.A Indiabulls Real Estate 3.3 Gurgaon - NH8 NCR N.A

Island Star Mall

Aug-17 N.A 37 N.A. Pune 1,610
Developers (ISMDPL)

Note: na Not Avaliable

Source: CRISIL Research
 PE Deals in 2016-17
Month Developer/ Investor Segment Location City Entry/Exit %Stake Amount(in
Entity Rs mn)
2018 Jan Forum Projects Blackstone Group Retail Rasulgarh square Bhubaneswar Entry 74

2018 Jan Ashiana Housing Creador Residential n.a n.a Exit 4.5

Century Real

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2018 Jan Estate Holdings Altico Capital Residential n.a n.a Exit n.a
Pvt. Ltd
Dwarka
2017 Dec Vatika Piramal Finance Residential NCR Entry n.a
Expressway
2017 Dec Supertech Altico Capital Residential Sector 74,Noida NCR Entry n.a

2017 Dec n.a Blackstone Group Commercial n.a n.a Exit n.a
Capacit’e
2017 Dec Paragon Partners Residential n.a n.a Exit n.a
Infraprojects
Kolte-Patil
2017 Dec KKR Residential Hinjewadi Pune Entry n.a
Developers Ltd
Sadbhav
2017 Dec Xander Residential n.a n.a Exit n.a
Infrastructure
BlackSoil Realty
2017 Dec Sankrit Group Residential n.a n.a Exit n.a
Fund

Note: na Not Avaliable

Source: CRISIL Research
 Thank you

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